Class action lawsuit in California in SurroGenesis scandal

8/14/2019 Class action lawsuit in California in SurroGenesis scandal

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Wayne E. Beaudoin, State Bar No. 184896LAW OFFICE OF WAYNE E.BEAUDOINA Professional Corporation15165 Ventura Boulevard, Suite 400Sherman Oaks, CA 91403

Telephone No.: (818) 205-2815Fax No.: (818) 788-8104

Theodore A. Penny, State Bar No. 62382Daniel L. Warshaw, State Bar No. 185365PEARSON, SIMON, WARSHAW & PENNY, L.L.P.15165 Ventura Boulevard, Suite 400Sherman Oaks, CA 91403Telephone: (818) 788-8300Facsimile (818) 788-8104

Attorneys for Plaintiffs, Individually and on Behalf of All Others Similarly Situated

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF ALAMEDA

BETH MADRONES andMARCIO MADRONES, Individually and onBehalf of all Others Similarly Situated,

Plaintiffs,

v.

SURROGENESIS USA, INC., a CaliforniaCorporation;SURROGENESIS, INC., a NevadaCorporation;SURROGENESIS USA, LLC, a DelawareLimited Liability Company;TONYA A. COLLINS, an individual;MICHAEL CHARLES INDEPENDENTFINANCIAL HOLDINGS GROUP, INC., aNevada Corporation;JACK KISEROW, an individual, and DOES 1

through 250, inclusive,Defendants.

Case No.

CLASS ACTION

CLASS ACTION COMPLAINT FOR:

1. BREACH OF CONTRACT;2. FRAUD;3. CONVERSION;4. VIOLATION OF PENAL CODE

496;5. UNLAWFUL, FRAUDULENT &

UNFAIR BUSINESS PRACTICESACT (CAL. BUS. & PROF. CODE 17200 ET. SEQ.);

6. BREACH OF FIDUCIARY DUTY;7. NEGLIGENCE;8. NEGLIGENT

MISREPRESENTATION;9. ACCOUNTING;

10. CONSTRUCTIVE TRUST; and11. CIVIL CONSPIRACY.

DEMAND FOR JURY TRIAL

/ / /

/ / /

1

CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL28


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Defendants conduct business, market and provide their services in the County of Alameda, State

of California.

THE PARTIES

THE PLAINTIFFS

4) Individual and representative plaintiff BETH MADRONES is a resident of Lake

In The Hills, Illinois, who contracted with SURROGENESIS for the latter to assist her with

third-party assisted reproduction services and, at the recommendation and/or insistence of

SURROGENESIS, deposited funds with defendant MICHAEL CHARLES.

5) Individual and representative plaintiff MARCIO MADRONES is a resident of

Lake In The Hills, Illinois, who contracted with SURROGENESIS for the latter to assist him

with third-party assisted reproduction services and, at the recommendation and/or insistence of

SURROGENESIS, deposited funds with defendant MICHAEL CHARLES.

THE DEFENDANTS

6) Plaintiffs are informed and believe and thereon allege that at all times alleged

herein defendant SURROGENESIS USA, INC. is a California Corporation doing business

throughout the United States of America and, in particular, Modesto, California.


herein defendant SURROGENESIS, INC. is a defunct Nevada Corporation doing business

throughout the United States of America and has its principal place of business in Modesto,

California.


herein defendant SURROGENESIS USA, LLC is a Delaware Limited Liability Company, doing

business throughout the United States of America and has its principal place of business in

Modesto, California.

9) Plaintiffs are informed and believe and thereon allege that defendant TONYA A.

COLLINS (hereinafter referred to herein as COLLINS) is an individual and resident of

Grapevine, Texas and the President and Chief Operating Officer (CEO) of SURROGENESIS

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USA, INC.; SURROGENESIS, INC. and SURROGENESIS USA, LLC. Plaintiffs are further

informed and believe and thereon allege that at all times alleged herein, defendant COLLINS

was an owner, officer, employee and/or agent of defendant MICHAEL CHARLES

INDEPENDENT FINANCIAL HOLDING GROUP, INC. Plaintiffs are further informed and

believe and thereon allege that at all times alleged herein, defendant COLLINS performed the

acts alleged herein while she was a resident of Modesto, California.


herein defendant MICHAEL CHARLES INDEPENDENT FINANCIAL HOLDING GROUP,

INC. (hereinafter referred to herein as MICHAEL CHARLES) is a Nevada Corporation, doing

business throughout the United States of America and has its principal place of business in

Modesto, California.

11) Plaintiffs are informed and believe and thereon allege that defendant JACK

KISEROW (hereinafter referred to herein as KISEROW) is an individual and resident of

Sparks, Nevada, and the owner and an officer of defendant MICHAEL CHARLES. Plaintiffs

are informed and believe and thereon allege that at all times alleged herein, defendant

KISEROW performed the acts alleged herein while acting as an owner, officer, agent and

representative of MICHAEL CHARLES, doing business in Modesto, California.

12) The true names and capacities, whether individual, corporate, associate or

otherwise of Defendants DOES 1 through 250, inclusive, and each of their roles in this case, are

known to plaintiffs who therefore sue said Defendants by such fictitious names pursuant to Code

of Civil Procedure 474. Plaintiffs further allege that each of said fictitious Defendants is in

some manner responsible for the acts and occurrences set forth herein. Plaintiffs will amend the

Complaint to show their true names and capacities when the same are ascertained, along with

their roles and the manner in which each fictitious Defendant is responsible.

13) Plaintiffs are informed and believe, and thereon allege, that at all times mentioned

herein, each and every Defendant was the agent, servant, employee, joint venturer, partner,

subsidiary, and/or co-conspirator of each other Defendant and, that in performing or failing to

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otherwise inaccessible to them.

17) This class action seeks disgorgement of profits, restitution, injunctive relief and

actual and punitive damages, where allowed. Excluded from the Plaintiff class are Defendants,

members of Defendants immediate families, officers, directors, employees of Defendants and

any subsidiary affiliate entity in which a Defendants have a controlling interest, and the legal

representatives, heirs, successors and assigns of any excluded person or entity.

18) Plaintiffs claims are typical of the claims of the class because plaintiffs and all

class members sustained damages which arise out of Defendants conduct as alleged herein.

19) Plaintiffs are representative parties who will fully and adequately protect the

interests of the class members, and who have retained class counsel who are experienced and

competent in both class and unfair business practices litigation. Plaintiffs have no interests

which are contrary to or in conflict with those of the class they seek to represent. The number

and identity of the members of the class are determinable from Defendants records.

20) Plaintiffs know of no difficulty to be encountered in the management of this

action which would preclude its maintenance as a class action. Relief concerning plaintiffs

rights under the laws alleged herein and with respect to the class would be appropriate.

21) A class action is superior to other methods for the fair and efficient adjudication

of litigation, since individual joinder of all members of each class is impracticable. Even if any

class member could afford individual litigation, it would be unduly burdensome to the individual

courts. Individual litigation magnifies the delay and expense to all parties. By contrast, the class

action device presents far fewer management difficulties and provides the benefits of unitary

adjudication, economies of scale, and comprehensive supervision by a single court.

Concentrating this litigation in one forum would promote judicial economy and efficiency and

promote parity among the claims of individual class members as well as judicial consistency.

22) A class action presents fewer management difficulties than individual litigation,

conserves the resources of the parties and the court system and protects the rights of each class

member. Notice of the pendency of any resolution of this action can be provided to class

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members by mail, print, broadcast, Internet and multimedia publication. A class action will be

more efficient, and save judicial resources and reduce litigation costs, so that Defendants are able

to pay more of any recovery or other relief to class members as opposed to paying attorneys fees

and costs in duplicative litigation.

23) There is a well defined community of interests in the question of law and fact

between plaintiffs and the class. Questions of law and fact common to the members of the

aforesaid class predominate over any questions which may affect only individual members, in

that Defendants have acted on grounds generally applicable to the entire class. Among the

questions of law and fact common to the class are:

a. Whether defendant SURROGENESIS contracted with Plaintiffs to provide

Plaintiffs with an independent trust company tasked with properly safeguarding Plaintiffs funds;

b. Whether defendant SURROGENESIS breached its contracts with Plaintiffs to

provide Plaintiffs with an independent trust company tasked with properly safeguarding

Plaintiffs funds;

c. Whether defendant SURROGENESIS owed Plaintiffs a fiduciary duty to ensure

that Plaintiffs funds were deposited with an independent trust company that would properly

safeguard Plaintiffs funds;

d. Whether defendant SURROGENESIS breached its fiduciary duty to ensure that

Plaintiffs funds were deposited with an independent trust company that would properly safeguard

Plaintiffs funds;

e. Whether defendant MICHAEL CHARLES owed Plaintiffs a fiduciary duty to

properly safeguard Plaintiffs deposited funds from loss or theft;

f. Whether defendant MICHAEL CHARLES breached its fiduciary duty to

Plaintiffs to properly safeguard Plaintiffs deposited funds from loss or theft;

g. Whether Defendants converted Plaintiffs deposited funds for his, her or its own

benefit;

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h. Whether Defendants misrepresented to Plaintiffs that Plaintiffs funds would be

deposited with an independent trust company tasked with properly safeguarding Plaintiffs

funds;

i. Whether Defendants misrepresentations were made intentionally, with the intent

to defraud Plaintiffs into depositing their funds with MICHAEL CHARLES;

j. Whether Defendant misrepresentations were made negligently, resulting in

Plaintiffs into depositing their funds with MICHAEL CHARLES;

k. Whether Defendants conduct was unlawful;

l. Whether Defendants were unjustly enriched because of their misrepresentations;

m. Whether the members of the class have sustained damages and, if so, what is the

proper measure of damages;

n. Whether the members of the class are entitled to punitive damages; and

o. Whether the members of the class are entitled to other equitable relief.

FIRST CAUSE OF ACTION

(Breach of Contract Against SURROGENESIS and DOES 1-25)

24) Plaintiffs hereby incorporate by reference paragraphs 1 through 23 inclusive of

this Complaint, as though fully set forth in this cause of action. This cause of action is asserted

by all Plaintiffs against defendant SURROGENESIS.

25) Plaintiffs, and each of them, entered into a written contract with

SURROGENESIS (the SurroGenesis Contract) in substantively the identical form as that

attached hereto and incorporated herein as Exhibit A.

26) Pursuant to the terms of the Contract, SURROGENESIS promised to set up an

independent trust fund for the purpose of making fee payments to Plaintiffs intended

surrogates and for the payment of other expenses related to the surrogacy process. Plaintiffs, and

each of them, understood that the term independent meant that the their funds would be

delivered in trust to a company unrelated in any manner to SURROGENESIS, its officers and

employees, and acting in accordance with the SurroGenesis Contract terms, which would then

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ensure the safety and availability of Plaintiffs funds for the purposes of satisfying their financial

obligations with their intended surrogates.

27) SURROGENESIS, in addition to requiring that Plaintiffs agree to the

SurroGenesis Contract, further required that Plaintiffs, and each of them, agree to and execute an

Agreement For Management Of Trust Account, in substantively the identical form as that

attached hereto and incorporated herein as Exhibit B.

28) The Agreement For Management of Trust Account provided that

SURROGENESIS was to administer Plaintiffs trust accounts, the funds of which were to be

deposited with a company identified by SURROGENESIS to be held for safekeeping for the

benefit of Plaintiffs. According to the terms of the Agreement For Management Of Trust

Account, the funds deposited with the trust company were to be clearly segregated from any

accounts holding funds to which SURROGENESIS, after withdrawing its fees, had any claim.

29) The company that SURRGENESIS identified and selected for handling Plaintiffs

trust accounts, and each of them, was MICHAEL CHARLES.

30) Plaintiffs are informed and believe and thereon allege that SURROGENESIS

breached the SurroGenesis Contract with Plaintiffs, and each of them, in that MICHAEL

CHARLES was not an independent trust company. Rather, Plaintiffs are informed and believe

and thereon allege that MICHAEL CHARLES was, for all intents and purposes, operated and

controlled by COLLINS, the President and CEO of SURROGENESIS. Had Plaintiffs, and each

of them, known that MICHAEL CHARLES was operated and controlled by COLLINS, they

would never have agreed to MICHAEL CHARLES holding their funds in trust.

31) Starting in or about November 2008, Plaintiffs were made aware that their

intended surrogates were not receiving payments from MICHAEL CHARLES pursuant to their

surrogacy agreements, or that the payments sent to the surrogates, in the form of checks drawn

from Plaintiffs trust accounts held by MICHAEL CHARLES, were being rejected as NSF for

insufficient funds in those accounts.

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32) In or about March 2009, SURROGENESIS advised Plaintiffs, and each of them,

that the funds held in Plaintiffs trust accounts through MICHAEL CHARLES were gone and

that SURROGENESIS did not know what had happened to their trust funds.

33) Plaintiffs are informed and believe and thereon allege that as a result of

SURROGENESIS breach of the SurroGenesis Contract, whereby SURROGENESIS failed to

arrange for an independent company to safeguard Plaintiffs trust funds, Plaintiffs have been

damaged in that SURROGENESIS, COLLINS and DOES 1-25 were provided unfettered access

and control of Plaintiffs trust accounts and that sometime in the past year, SURROGENESIS,

COLLINS and DOES 1-25 converted Plaintiffs trust funds for their own benefit, or otherwise

denied Plaintiffs the use of or access to their trust funds.

34) Accordingly, as a direct result of SURROGENESIS breach of the SurroGenesis

Contract, Plaintiffs and the class have either lost the approximate $2,500,000.00 in funds they

deposited with MICHAEL CHARLES, or have otherwise been denied the use or access to those

funds.

SECOND CAUSE OF ACTION

(Fraud Against SURROGENESIS and DOES 26-50)


this Complaint, as though fully set forth in this cause of action.

36) Plaintiffs are informed and believe and thereon allege that SURROGENESIS and

DOES 11-20 knew that the representations made in the SurroGenesis Contract entered into with

Plaintiffs, and each of them, on various dates in the past three (3) years, that Plaintiffs funds

would be deposited with an independent trust company, were false at the time the

SurroGenesis Contracts were entered into. Plaintiffs are informed and believe and thereon allege

that at all times relevant herein, SURROGENESIS knew that MICHAEL CHARLES was not an

independent trust company, but rather MICHAEL CHARLES was operated and controlled by

SURROGENESIS and/or COLLINS.

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37) Plaintiffs are informed and believe that SURROGENESIS and DOES 26-50

intended for Plaintiffs to reasonably rely on the representation in the SurroGenesis Contract that

their funds would be held in trust by an independent trust company.

38) Plaintiffs and the class were unaware of the falsity of the Defendants

representation that their funds would be held by an independent trust company and reasonably

relied upon the misrepresentations made by SURROGENESIS and DOES 26-50.

39) Had Plaintiffs and the class known that MICHAEL CHARLES was operated and

controlled by SURROGENESIS and/or COLLINS, they would never have agreed to MICHAEL

CHARLES holding their funds in trust.

40) Plaintiffs and the class have incurred damages as a result of SURROGENESIS

and DOES 26-50s intentional misrepresentations, as Plaintiffs and the class have either lost the

approximate $2,500,000.00 in funds they deposited with MICHAEL CHARLES, or have

otherwise been denied the use or access to those funds. In addition, Plaintiffs have suffered from

emotional distress, financial distress, annoyance and anxiety, as a result of Defendants actions

alleged herein, and seek damages in an amount to be determined at trial for the same.

THIRD CAUSE OF ACTION

(Conversion Against SURROGENESIS, COLLINS,

MICHAEL CHARLES and DOES 51-100)



42) At all times herein mentioned, Plaintiffs and the class were, and still are, the

owners and were, and still are, entitled to possession of the approximately $2,500,000.00 in

funds Plaintiffs deposited in trust with MICHAEL CHARLES.

43) Defendants, despite having knowledge that these trust funds belong to Plaintiffs,

continue to hold Plaintiffs trust funds, refuse to return Plaintiffs trust funds and have reaped

financial gain from their wrongful retention of Plaintiffs trust funds.

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44) As a direct and proximate cause of Defendants conversion of Plaintiffs trust

funds, Plaintiffs and the class have suffered damages, the full nature and extent of which are

presently unknown to Plaintiff, but estimated to be approximately $2,500,000.00, which will be

determined according to proof at trial. In addition, Plaintiffs have suffered from emotional

distress, financial distress, annoyance and anxiety, as a result of Defendants actions alleged

herein, and seek damages in an amount to be determined at trial for the same.

45) Defendants acts alleged above were willful, wanton, malicious, and oppressive,

and therefore justify the awarding of exemplary and punitive damages.

FOURTH CAUSE OF ACTION

(Violation of Penal Code 496 - Receiving and/or Concealing Stolen Property

Against SURROGENESIS, COLLINS, MICHAEL CHARLES and DOES 51-100)



47) Plaintiffs are informed and believe, and thereon allege, that at all times relevant to

this Complaint, Defendants violated California Penal Code section 496 by obtaining property

belonging to Plaintiffs by theft and knowingly withholding the property from Plaintiffs or by

aiding in obtaining and knowingly withholding said property.

48) Plaintiffs have been injured by Defendants violation of California Penal Code

section 496.

49) Pursuant to California Penal Code section 496(c), Plaintiffs and the class are

entitled to three times the amount of their actual damages, an amount to be proven at trial, cost of

suit, and their reasonable attorneys fees for prosecuting this action.

FIFTH CAUSE OF ACTION

(Unfair, Fraudulent & Unfair Business Practices Act Cal. Bus. & Prof. Code 17200 et.

seq. Against All Defendants)



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51) Defendants have engaged in and continue to engage in unlawful, fraudulent and

unfair practices, which are substantially likely to mislead the public, by representing to members

of the general public seeking assistance in third-party surrogacy services that their funds will be

held in trust by an independent trust company which, as set forth above, is false.

52) Plaintiffs are informed and believe and thereon allege that Defendants conduct

resulted in profits and pecuniary gain received from customers who contracted with

SURROGENESIS to provide third-party surrogacy services and hold their funds in trust with an

independent trust company.

53) The business acts and practices of defendants are unlawful, unfair and deceptive

within the meaning of the consumer protection statutes because, inter alia, Defendants engaged

in fraud by intentionally misrepresenting that Plaintiffs' funds would be held in trust by an

independent trust company, converted Plaintiffs' trust funds for their own use and benefit,

violated Penal Code 496 and otherwise engaged in acts that deceived, or were likely to deceive,

the public.

54) As a direct and proximate result of Defendants conduct, as set forth herein,

Defendants have received ill-gotten gains and/or profits, including, but not limited to money.

Therefore, Defendants were and are unjustly enriched. Pursuant to Business & Professions Code

17203, Plaintiffs and the class request restitution and/or restitutionary disgorgement of all

sums, including profits, obtained in violation of Business & Professions Code 17200, et seq.

55) Plaintiffs and the class seek injunctive relief, restitution and restitutionary

disgorgement of ill-gotten gains from Defendants as specifically provided in Business &

Professions Code 17203. Plaintiffs and the class seek injunctive relief, restitution and

restitutionary disgorgement of the ill-gotten gains from Defendants.

56) Plaintiffs engaged counsel to prosecute this action.

57) Plaintiffs and the class seek to enjoin Defendants from engaging in these wrongful

practices, as alleged herein, in the future. There is no other adequate remedy at law and if an

injunction is not ordered, Plaintiffs and the class will suffer irreparable harm.

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SIXTH CAUSE OF ACTION

(Breach of Fiduciary Duty Against SURROGENESIS, COLLINS, MICHAEL

CHARLES, KISEROW and DOES 1-50)



59) Defendants SURROGENESIS, COLLINS, MICHAEL CHARLES, KISEROW

and DOES 1 -50, and each of them, owed Plaintiffs a fiduciary duty to make sure that the funds

Plaintiffs deposited in trust with MICHAEL CHARLES would be kept safe, secure, protected

from theft and available to Plaintiffs to fund their third-party surrogacy contracts and related

expenses.

60) Defendants SURROGENESIS, COLLINS, MICHAEL CHARLES, KISEROW

and DOES 1-50, and each of them, breached their fiduciary duties to Plaintiffs and the class in

that they failed to arrange for Plaintiffs funds to be handled by an independent trust company,

failed to safeguard the funds from theft and/or otherwise failed to ensure that Plaintiffs funds

would be available to them for funding their third-party surrogacy contracts and related

expenses.

61) As a direct result of Defendants breach of their fiduciary duties, Plaintiffs and the

class have been damaged in the amount of approximately $2,500,000.00, as Plaintiffs have either

lost the funds they deposited with MICHAEL CHARLES, or have otherwise been denied the use

or access to those funds. In addition, Plaintiffs and the class have suffered from emotional

distress, financial distress, annoyance and anxiety, as a result of Defendants actions alleged

herein, and seek damages in an amount to be determined at trial for the same.

SEVENTH CAUSE OF ACTION

(Negligence Against All Defendants)



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63) Defendants, and each of them, owed Plaintiffs a duty to make sure that the funds

Plaintiffs deposited in trust with MICHAEL CHARLES would be kept safe, secure, protected

from theft and available to Plaintiffs to fund their third-party surrogacy contracts and related

expenses.

64) Defendants, and each of them, breached their duties to Plaintiffs and the class in

that they negligently failed to arrange for Plaintiffs funds to be handled by an independent trust

company, negligently failed to safeguard the funds from theft and/or otherwise negligently failed

to ensure that Plaintiffs funds would be available to them for funding their third-party surrogacy

contracts and related expenses.

65) As a direct result of Defendants negligence, Plaintiffs and the class have been

damaged in the amount of approximately $2,500,000.00, as Plaintiffs have either lost the funds

they deposited with MICHAEL CHARLES, or have otherwise been denied the use or access to

those funds. In addition, Plaintiffs and the class have suffered from emotional distress, financial

distress, annoyance and anxiety, as a result of Defendants actions alleged herein, and seek

damages in an amount to be determined at trial for the same.

EIGHTH CAUSE OF ACTION

(Negligent Misrepresentation Against SURROGENESIS, COLLINS, MICHAEL

CHARLES, KISEROW and DOES 1-50)



67) Plaintiffs are informed and believe and thereon allege that Defendants represented

to Plaintiffs and the class, and each of them, through the SurroGenesis Contract and otherwise,

that Plaintiffs funds would be deposited with an independent trust company. Plaintiffs are

informed and believe and thereon allege that Defendants statements were false at the time the

SurroGenesis Contracts were entered into. Plaintiffs are informed and believe and thereon allege

that at all times relevant herein, SURROGENESIS knew that MICHAEL CHARLES was not an

independent trust company, but rather MICHAEL CHARLES was operated and controlled by

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SURROGENESIS and/or COLLINS.

68) Plaintiffs are informed and believe that SURROGENESIS and DOES 1-50

intended for Plaintiffs to reasonably rely on the representation in the SurroGenesis Contract that

their funds would be held in trust by an independent trust company.

69) Plaintiffs and the class were unaware of the falsity of the representation that their

funds would be held by an independent trust company and reasonably relied upon the

misrepresentations made by SURROGENESIS and DOES 1-50, as they had no reason not to

believe the representations at the time they were made.

70) Had Plaintiffs and the class known that MICHAEL CHARLES was operated and

controlled by COLLINS, they would never have agreed to MICHAEL CHARLES holding their

funds in trust.

71) Plaintiffs and the class have incurred damages as a result of SURROGENESIS

and DOES 1-50s intentional misrepresentations, as Plaintiffs have either lost the approximate

$2,500,000.00 in funds they deposited with MICHAEL CHARLES, or have otherwise been

denied the use or access to those funds. In addition, Plaintiffs and the class have suffered from

emotional distress, financial distress, annoyance and anxiety, as a result of Defendants actions

alleged herein, and seek damages in an amount to be determined at trial for the same.

NINTH CAUSE OF ACTION

(Accounting Against All Defendants)



73) Plaintiffs and the class are unable to ascertain the exact amount of funds they

placed in trust with MICHAEL CHARLES and the amount of funds, if any, that remain in any of

Defendants possession, custody or control. An unknown balance is due to Plaintiffs that cannot

be ascertained without and accounting, the means by which are within the knowledge of

Defendants.

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74) Accordingly, Plaintiffs seek an Order by the Court directing an equitable

accounting of all funds placed in deposit with MICHAEL CHARLES and the amount of funds

remaining in Defendants possession, custody or control.

TENTH CAUSE OF ACTION

(Constructive Trust Against All Defendants)



76) Defendants knowingly took possession of specific property, namely funds,

belonging to Plaintiffs and the class, knowing they had no entitlement to those funds. The funds

held by Defendants can be traced to Plaintiffs deposit of their funds with MICHAEL

CHARLES, which rightfully belong to Plaintiffs and the class.

77) Because of Defendants wrongful acts, Plaintiffs and the class were deprived of

their property, specifically the funds deposited in trust with MICHAEL CHARLES, which are

now held by Defendants. Defendants breach of contract, fraud, conversion, negligence and

other wrongful acts have caused and will continue to cause Defendants to be unjustly enriched.

78) As a proximate result of Defendants wrongful acts as alleged herein, Plaintiffs

and the class are entitled to a constructive trust in which Defendants, as constructive trustees,

should be required to hold all income, profits, commissions, fees, revenues and other funds,

received by Defendants as a result of their wrongful acts, for the benefit of Plaintiffs and the

class. Plaintiffs and the class are entitled to a constructive trust as against all Defendants who

have gained financially as a result of Defendants wrongful acts.

ELEVENTH CAUSE OF ACTION

(Civil Conspiracy Against All Defendants)



80) Plaintiffs are informed and believe and thereon allege that sometime between

January 2007 and the present, Defendants did knowingly and willfully conspire and agree among

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themselves to: (1) misrepresent to Plaintiffs and the class that their trust funds would be handled

by an independent trust company; (2) entice Plaintiffs and the class into depositing their trust

funds with MICHAEL CHARLES; and (3) convert Plaintiffs trust funds for their own use and

benefit as set forth herein.

81) In furtherance of said conspiracy and agreement, the aforementioned Defendants

engaged in fraudulent representations, omissions and concealment of facts, acts of cover-up and

statements calculated to obtain Plaintiffs trust funds for the benefit of Defendants and as set

forth in detail in the foregoing paragraphs, which are hereby incorporated herein as though set

forth in full.

82) All of the actions of Defendants set forth in the preceding paragraphs,

incorporated herein, were in violation of the rights of Plaintiffs and the class and committed in

furtherance of the aforementioned conspiracies and agreements. Moreover, each of the

aforementioned Defendants lent aid and encouragement and knowingly financed, ratified and

adopted the acts of the other. As a proximate result of the wrongful acts herein alleged, Plaintiffs

and the class have suffered significant damage, which is estimated to be $2,500,000.00, or

otherwise determined at trial.

83) These acts constituted malicious conduct which was carried on by said

Defendants with willful and conscious disregard for Plaintiffs rights with the intention of

misappropriating Plaintiffs trust funds or otherwise causing injury, and was despicable conduct

that subjected Plaintiffs to a cruel and unjust hardship so as to justify an award of exemplary and

punitive damages. Accordingly, punitive damages should be awarded against Defendants to

punish them and deter them and other such persons from committing such wrongful and

malicious acts in the future.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, on behalf of themselves and all other similarly situated,

pray for relief and judgment against Defendants as follows:

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1. That the court enter an order certifying the plaintiff class and any appropriate sub-

class thereof, and appointing plaintiffs and their counsel to represent the class (All Causes of

Action);

2. For damages according to proof (as to the First, Second, Third, Fourth, Sixth,

Seventh and Eighth Causes of Action against Defendants);

3. That the Court enter an order for restitution and/or restitutionary disgorgement of

profits wrongfully obtained by the Defendants (Fifth Cause of Action);

4. That Plaintiffs and the class be awarded punitive damages sufficient to deter and

make an example of Defendants (As to the Second, Third and Eleventh Causes of Action);

5. For three times the amount of Plaintiffs actual damages, an amount to be proven

at trial, cost of suit, and their reasonable attorneys fees for prosecuting this action, pursuant to

California Penal Code section 496(c);

6. For preliminary and injunctive relief placing a hold on any and all trust or other

accounts established on Plaintiffs behalf by MICHAEL CHARLES and/or SURROGENESIS

(All Causes of Action);

7. For preliminary and injunctive relief on Plaintiffs behalf requiring Defendants to

discontinue representing to the general public seeking third-party surrogacy assistance that their

funds will be handled by an independent trust company (Fifth Cause of Action);

8. For reasonable attorneys fees (as permitted under Penal Code 496, Code of Civil

procedure 1021.5, or as otherwise allowable under law);

9. Pre-judgment and post-judgment interest as permitted by California law;

10. For Plaintiffs costs incurred and;

/ / /

/ / /

/ / /

/ / /

/ / /

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DEMAND FOR JURY TRIAL

Plaintiffs, Individually and on behalf of All Others Similarly Situated, hereby demand

that this matter be tried by jury.

DATED: April ___, 2009 LAW OFFICE OF WAYNE E. BEAUDOINA Professional Corporation

By:

Wayne E. BeaudoinAttorneys for Plaintiffs, Individually and on behalf ofAll Others Similarly Situated

DATED: April ___, 2009 PEARSON SIMON WARSHAW & PENNY LLP

By:

Daniel L. WarshawAttorneys for Plaintiffs, Individually and on behalf ofAll Others Similarly Situated

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Class action lawsuit in California in SurroGenesis scandal

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